A blog from the Center for Small Towns, a community outreach organization operated through the University of Minnesota, Morris. The Center prides itself on meeting the needs of small towns and organizations through a flexible, multi-faceted, community focused approach.

Otter Tail Resorts: Part II

This is part 2 of a series by Kelly Asche showcasing resort businesses in Otter Tail County. In Part 1, we gave an overview of an analysis comparing the economic impacts of resort guests compared to seasonal residents. The following narrative provides the results and themes from a survey of and discussions with resort owners.

Since 1985, over 50% of Otter Tail County’s resorts have closed. As tourism is the county’s 2nd largest industry, the importance of the success of these businesses cannot be overstated. And the implications of this decline are exactly what Nick Leonard, the Director of Tourism and Economic Development for Otter Tail County, wanted to find out.

We brought together the tourism expertise of Ryan Pesch and Dan Erkkila from the U of MN Extension along with the hands-on experience of Nick Leonard (who is a resort-owner himself) to survey and interview resort owners about their future plans and what they saw as the largest barriers to business.

Resort Owners Future Plans

The survey results indicate that Otter Tail resorts will be going through an extensive transition period over the next 10 years. When asked what they are currently considering to do with their business in the next 10+ years, a majority of respondents reported “sell as a resort” (Figure 1). When asked what they are considering to do in the next 0 to 5 years, “sell as a resort” and “expand at this location” received the most responses (Figure 2).

Figure 1: % of respondents by their future plans in next 10+ years (n=37)Figure 2: # of respondents by their plans with their business in the next 0 to 5 years

Of the resorts considering closing, selling, or downsizing, a majority cited high local taxes and land/resource regulations as the main reasons (Figure 3). Retiring, high state taxes, and cost of insurance were just under 50%. Taxes, regulations and insurance costs were also reported as significant barriers to business growth (Figure 4).

Figure 3: % of respondents by reasons for selling, closing, or downsizing (n=29)Figure 4: % of respondents by their feelings on biggest barriers preventing business growth (n=37)

Barriers to Future Growth

In group discussions, resort owners were asked to describe what they felt were the biggest barriers to future growth for their businesses. The following points were summarized from those discussions and are considered perceived issues by the owners.

The amount of rules and regulations is seen as a major barrier to expanding or growing a business and contributes to negative feelings about the future success of resorts.

Owners believe that many rules and regulations are very difficult to interpret and comply with, and sometimes there are conflicting rules between different levels of government (i.e. County vs. State Agency).

They also feel that rules and regulations change frequently and resorts find it difficult to know when they are in compliance.

Owners perceive inconsistencies in what they are supposed to do in order to be in compliance, leading to variation in the adoption of rules.

Owners report that historically, restrictive county land and resource regulations have specifically impeded resort and campground growth ( Note: While this study was underway, Otter Tail County adopted a less restrictive shoreland management ordinance).

It was stated numerous times that the costs of staying in compliance can be very difficult for resorts to afford, specifically in terms of regulations focused on wells, septic systems, and lakeshore management.

Owners feel limited on the amount of maintenance and repair they can do themselves due to rules and regulations.

Owners feel that the costs of permits are excessive and are not proportional to the size of a business.

Owners expressed frustration over the amount of shoreline they owned.

Over the past several decades many resorts have sold off adjoining but unused resort property for private development. During that same period, lakeshore prices have risen significantly and regulations for development have become increasingly restrictive. Today, as referenced above, 60% of Otter Tail County resorts and campgrounds are on 10 acres or less. The lack of land and inability to affordably purchase and expand the resort property is a significant barrier to an owner’s ability to add more density.

Many owners stated that taxes are high and a disincentive to make improvements and grow.

Owners felt that current tax values far exceed the value of most resort or campground businesses.

Resorts are reluctant to make improvements to their property/business due to high valuations and increased property taxes.

Owners reported that the timing of taxes owed do not align with the business’s cash-flow. It would be very beneficial if the deadline of taxes owed for the 1st quarter were pushed back.

Find the full report at z.umn.edu/ottertailresorts.

The decline in the number of resorts is not unique to Otter Tail County. Explore Minnesota has been tracking this issue throughout Minnesota and has had discussions about this issue since the 1990s. Some of the decline is attributed to external economic factors and customer shifts outside of the county’s control. However, resort owners pointed out a number of ways in which the county can help reduce some of the barriers through policy changes, and support their businesses through key investments.

In part 3, we will highlight the key suggestions developed by Nick Leonard on which the county can base future actions.